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Making Climate Policy Work
For decades, the world’s governments have struggled to move from talk to action on climate. Many now hope that growing public concern will lead to greater policy ambition, but the most widely promoted strategy to address the climate crisis – the use of market-based programs – hasn’t been working and isn’t ready to scale.
Danny Cullenward and David Victor show how the politics of creating and maintaining market-based policies render them ineffective nearly everywhere they have been applied. Reforms can help around the margins, but markets’ problems are structural and won’t disappear with increasing demand for climate solutions. Facing that reality requires relying more heavily on smart regulation and industrial policy – government-led strategies – to catalyze the transformation that markets promise, but rarely deliver.
Danny Cullenward and David Victor show how the politics of creating and maintaining market-based policies render them ineffective nearly everywhere they have been applied. Reforms can help around the margins, but markets’ problems are structural and won’t disappear with increasing demand for climate solutions. Facing that reality requires relying more heavily on smart regulation and industrial policy – government-led strategies – to catalyze the transformation that markets promise, but rarely deliver.
256 pages, Kindle Edition
Published October 6, 2020
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464 people want to read
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Displaying 1 - 7 of 7 reviews
May 22, 2023
A great interdisciplinary and grounded analysis of why economically optimal policies are not necessarily the ones that pass or actually work in practice. While economists like to think of markets as abstract platonic entities, in reality markets are a push and pull of institutions with different incentives and power structures, particularly in imperfect liberal democracies like ours. Unfortunately, there have been entire national environmentalist advocacy groups who have made economically justifiable but politically impractical policies their entire platform for how to solve climate change. This book, written by real policy practitioners, is a much needed remedy.
March 14, 2023
All of economics comes down to one single, completely flawed premise — that all humans are completely rational, and completely selfish. Which, no. Humans will help each other out for no benefit, and will buy stupid stuff because it’s shiny, that’s just how we’re evolved.
But, there is a species that evolved to be perfectly rational and selfish: the corporation. A perfectly rational, selfish entity made up of irrational, selfless humans. Weird. So when you apply things like a carbon tax to a company, ideally what would happen is the company would act perfectly rationally and cut its carbon emissions. But, this book argues, they act rationally in a world full of irrational humans.
They don’t say, oh, guess we better spend money decarbonizing. They say oh, guess we better spend money bribing those stupid humans to give us extra carbon credits, or spend money on PR campaigns to make those stupid humans vote against carbon taxes. Or offsets. Fucking offsets.
And so this economics-slash-policy book with a very dry name makes, to me, an interesting argument. These pure economics policies that would work in a world of rational humans and rational companies, don’t work in a world of rational companies and irrational politicians, voters, and governments. It takes a political worldview, lots of evidence, and a good amount of economics to tell us what we should actually do — and the answer is more regulations: put up hard walls against pollution, not soft, malleable pillows made of market fuckery.
Because of my knowledge of environmental econ, I was of course a huge carbon tax fan, but in the face of the truth this book has given me, well, maybe I’ll have to change my tune. Like I holler at the ghost of Friedman all the time, my perfect graphs with nice straight lines don't trump reality.
My main criticism is that carbon pricing can be used as a tool of environmental justice, which is not mentioned. In Canada carbon taxes are collected and then redistributed (AKA: carbon dividend). They talk a bit about politically-motivated use of carbon tax revenue, but that's like, it. Regulations on industries will not bring about a just transition or a more equitable economy; but I would argue, that in a perfect world, carbon pricing.... uhhh, might.
But, there is a species that evolved to be perfectly rational and selfish: the corporation. A perfectly rational, selfish entity made up of irrational, selfless humans. Weird. So when you apply things like a carbon tax to a company, ideally what would happen is the company would act perfectly rationally and cut its carbon emissions. But, this book argues, they act rationally in a world full of irrational humans.
They don’t say, oh, guess we better spend money decarbonizing. They say oh, guess we better spend money bribing those stupid humans to give us extra carbon credits, or spend money on PR campaigns to make those stupid humans vote against carbon taxes. Or offsets. Fucking offsets.
And so this economics-slash-policy book with a very dry name makes, to me, an interesting argument. These pure economics policies that would work in a world of rational humans and rational companies, don’t work in a world of rational companies and irrational politicians, voters, and governments. It takes a political worldview, lots of evidence, and a good amount of economics to tell us what we should actually do — and the answer is more regulations: put up hard walls against pollution, not soft, malleable pillows made of market fuckery.
Because of my knowledge of environmental econ, I was of course a huge carbon tax fan, but in the face of the truth this book has given me, well, maybe I’ll have to change my tune. Like I holler at the ghost of Friedman all the time, my perfect graphs with nice straight lines don't trump reality.
My main criticism is that carbon pricing can be used as a tool of environmental justice, which is not mentioned. In Canada carbon taxes are collected and then redistributed (AKA: carbon dividend). They talk a bit about politically-motivated use of carbon tax revenue, but that's like, it. Regulations on industries will not bring about a just transition or a more equitable economy; but I would argue, that in a perfect world, carbon pricing.... uhhh, might.
March 24, 2021
The book dedicates 6 of the 8 main chapters to draw out the historical failures of carbon pricing mechanisms (of which there are admittedly many) and makes the case that carbon markets should be scaled down and abandoned. However it fails to propose a compelling alternative (in contrast to the title of the book) on how to make climate policy work! The authors dedicated just a single chapter to articulate an alternative solution which they coin "experimentalist governance" . Under this model, instead of companies paying for their emissions and creating a source of revenue to fund the low carbon transition, governments should focus on playing a much bigger role in creating and supporting industrial policies to accelerate the creation of low-carbon solutions. The benefits of this approach is that it takes less political capital to implement. Unsurprisingly however, individual taxpayers end up footing the bill under this model through loan guarantees and direct government support. In short, taxpayers end up bearing the risk and costs in supporting these new innovations and the rewards for any successes are captured mainly by private businesses. Furthermore, there are a number of problematic assumptions underpinning the books arguments mainly ; (1) only Europeans will ever be capable of supporting efforts that price carbon at sufficiently high levels to incentivize meaningful decarbonisation (no supporting evidence is provided for this view ) (2) that voters will somehow be more supportive of government intervention to help pick winners and losers than market based solutions (no evidence is provided). (3) that policy makers cannot learn from past experiences with carbon market and pricing.
September 29, 2025
This book was by far one of the most complete analysis on climate policy that I have read. The authors approached carbon markets from dimensions that one hardly gets to witness in the discourse. Eliminating the role of politics in how carbon markets are designed and governed has the detrimental effect of leaving them functioning as a shell of a promising machine.
Carbon markets have dominated the diplomatic effort on climate change for decades on the premise that a financial incentive to curtail pollution is exactly what would drive deep decarbonization globally (ideologues of the neo-liberal economic order need a financial incentive to care for the planet they inhabit, not humanity, but a financial incentive (capitalism really goes to any lengths to justify greed as a positive emotion)).
Carbon markets are unfortunately, just as far away from reality as any other textbook economic theory. Aren’t we already living in climate-changing times? Just this monsoon season, Pakistan witnessed rainfall unlike any, with entire villages washed away in the dead of the night. It’s heartbreaking that with having lived and living through the horrors of climate disasters, the discourse is still nascent or rather, rife with backdoor politics that have crippled the hopes of a meaningful price on carbon.
In this perpetual environment of natural disasters ranging from heatwaves to flooding and everything in between, can carbon markets influence the industrial and economic transformation needed to adapt on-ground infrastructures to climate change? The authors of this book think that faint market signals and the invisible technocratic hand guiding the markets are only capable of marginal changes and that real change comes from policy that is predictable and protects industries against the risk of new and green technologies.
The book argues that carbon markets, as they stand today, are plagued by interest groups and politics that prevent scarcity of permits and thus, high carbon prices from ever materialising, and without a high cost of carbon adding to the business cost of production, the incentive to emit less disappears, and business continues as usual.
Another problem that arises is that the singular carbon price for all emitting industries is a naive attempt to incentivise lower emissions; when each industry is faced with a different cost-benefit equation, their acceptance of even that low, single carbon price will vary, furthermore, without alternative low-carbon technology cheaply available at scale, there is not much that emitting industries can turn to.
The authors argue that in order to create successful carbon markets, we need to stop expanding their jurisdiction and instead look to the opposite. We need to shrink the scope of these markets to similar industries so that each is dealt with a hand within its business environment. Governments also need to push for policies that incentivise the development of transformative technology and guide it through ideation and diffusion because the market cannot cover the risks these firms might face, nor can it safely mobilise the investment needed for transformation.
I think this book is a must-read for anyone working in the climate sector; the insights and assessments are an apt starting point to build climate policy on.
Carbon markets have dominated the diplomatic effort on climate change for decades on the premise that a financial incentive to curtail pollution is exactly what would drive deep decarbonization globally (ideologues of the neo-liberal economic order need a financial incentive to care for the planet they inhabit, not humanity, but a financial incentive (capitalism really goes to any lengths to justify greed as a positive emotion)).
Carbon markets are unfortunately, just as far away from reality as any other textbook economic theory. Aren’t we already living in climate-changing times? Just this monsoon season, Pakistan witnessed rainfall unlike any, with entire villages washed away in the dead of the night. It’s heartbreaking that with having lived and living through the horrors of climate disasters, the discourse is still nascent or rather, rife with backdoor politics that have crippled the hopes of a meaningful price on carbon.
In this perpetual environment of natural disasters ranging from heatwaves to flooding and everything in between, can carbon markets influence the industrial and economic transformation needed to adapt on-ground infrastructures to climate change? The authors of this book think that faint market signals and the invisible technocratic hand guiding the markets are only capable of marginal changes and that real change comes from policy that is predictable and protects industries against the risk of new and green technologies.
The book argues that carbon markets, as they stand today, are plagued by interest groups and politics that prevent scarcity of permits and thus, high carbon prices from ever materialising, and without a high cost of carbon adding to the business cost of production, the incentive to emit less disappears, and business continues as usual.
Another problem that arises is that the singular carbon price for all emitting industries is a naive attempt to incentivise lower emissions; when each industry is faced with a different cost-benefit equation, their acceptance of even that low, single carbon price will vary, furthermore, without alternative low-carbon technology cheaply available at scale, there is not much that emitting industries can turn to.
The authors argue that in order to create successful carbon markets, we need to stop expanding their jurisdiction and instead look to the opposite. We need to shrink the scope of these markets to similar industries so that each is dealt with a hand within its business environment. Governments also need to push for policies that incentivise the development of transformative technology and guide it through ideation and diffusion because the market cannot cover the risks these firms might face, nor can it safely mobilise the investment needed for transformation.
I think this book is a must-read for anyone working in the climate sector; the insights and assessments are an apt starting point to build climate policy on.
January 3, 2026
This is the problem looking for
According to these offers markets don't work because there is too much government and political interference so their answer to that problem is more government and political interference and let's top it off with industry policy which frankly has been shown to fail massively they then justify that actually industry policy can work in the 21st century just look at the Innovations of China at which point iron left to ask how ignorant of basic and widely available facts to unique to be to understand how Ludacris and ridiculous this statement is this book is a great manual and insight into what not to do when it comes to public policy especially around climate change
According to these offers markets don't work because there is too much government and political interference so their answer to that problem is more government and political interference and let's top it off with industry policy which frankly has been shown to fail massively they then justify that actually industry policy can work in the 21st century just look at the Innovations of China at which point iron left to ask how ignorant of basic and widely available facts to unique to be to understand how Ludacris and ridiculous this statement is this book is a great manual and insight into what not to do when it comes to public policy especially around climate change
January 25, 2021
Market forces are necessary but not enough for climate policy, the political realities limit the theoretical benefits of economic instruments. We need bold industrial policy and regulation as well. Great read for policy makers trying to avoid a hotter world
April 14, 2021
A great book and very smooth read. Clear arguments made by the authors on how to reform carbon markets. A must-read for anyone working in climate policy.
Displaying 1 - 7 of 7 reviews